The US has announced an $8.5 billion preliminary agreement with Intel, the largest CHIPS investment yet

The US has announced an $8.5 billion preliminary agreement with Intel, the largest CHIPS investment yet.

It will take a considerable amount of time for new manufacturing projects to become operational, and there are existing environmental concerns about the availability of water in Arizona to sustain chip manufacturing in the long term.

Funding for several Intel projects, spanning Arizona and three other states, originates from the CHIPS and Science Act, a significant legislative achievement for President Biden that received bipartisan support and was passed by Congress in the summer of 2022. The Biden administration has so far announced awards for only three other companies under the CHIPS Act, as the vetting process for applicants takes time.

The objective of the law is to enhance domestic manufacturing of semiconductor chips. Despite being a former leader in the industry, the United States currently produces only about 10% of the global supply and none of the most advanced types of chips required for artificial intelligence technologies.

The funding provided by the CHIPS Act aims to address what Commerce Secretary Gina Raimondo described as a "national security problem," stemming from America's reliance on Asia for the production of most leading-edge chips.

The preliminary funding agreement announced on Wednesday, including an $8.5 billion grant and up to $11 billion in loans, will support the construction, expansion, or modernization of Intel facilities in Arizona, Ohio, New Mexico, and Oregon. The funds will be released in phases, contingent upon Intel meeting specific milestones, and are expected to begin flowing "by the end of this year," according to a senior administration official.

In Chandler, Arizona, where President Biden will announce the CHIPS initiative, the funding is expected to facilitate the construction of two new manufacturing facilities, known as fabs, and the modernization of an existing one. This is projected to create 7,000 construction jobs and 3,000 manufacturing jobs, as per the White House.

The first fab in Arizona is scheduled to be operational by the end of 2024, as stated by a senior administration official.

Overall, the White House estimates that the Intel investment, spanning the four states, will generate nearly 30,000 jobs.